Wednesday, September 07, 2016

How Great Organizations With Smart People Can Destroy Themselves

Via a tip from my buddy and fellow Paleoblogger Chap, we have a simply sublime outline about how Target blew itself up in Canada.

In light of the last week's reminder of some of our Navy's self inflicted wounds, I ask you to give Joe Castaldo's article in a full read; THE LAST DAYS OF TARGET: The untold tale of Target Canada’s difficult birth, tough life and brutal death.

In Salamander's world, this article would be fully briefed at the OPNAV and NAVSEA LCS Stand Down (if they had one) at the same time we are having our LCS Maintenance Stand Down.

Let me know if you recognize anything;
The company was having trouble moving products from its cavernous distribution centres and onto store shelves, which would leave Target outlets poorly stocked. The checkout system was glitchy and didn’t process transactions properly. Worse, the technology governing inventory and sales was new to the organization; no one seemed to fully understand how it all worked. The 750 employees at the Mississauga head office had worked furiously for a year to get up and running, and nerves were beginning to fray. Three test stores were slated to open at the beginning of March, followed shortly by another 21. A decision had to be made.

Fisher, 38 years old at the time, was regarded as a wunderkind who had quickly risen through the ranks at Target’s American command post in Minneapolis, from a lowly business analyst to leader of a team of 400 people across multiple divisions. Launching the Target brand in a new country was his biggest task to date. The news he received from his group that February afternoon should have been worrying, but if he was unnerved, Fisher didn’t let on. He listened patiently as two people in the room strongly expressed reticence about opening stores on the existing timetable. Their concern was that with severe supply chain problems and stores facing the prospect of patchy or empty shelves, Target would blow its first date with Canadian consumers. Still, neither one outright advocated that the company push back its plans. “Nobody wanted to be the one to say, ‘This is a disaster,’” says a former employee. But by highlighting the risks of opening now, the senior employees’ hope was that Fisher would tell his boss back in Minneapolis, Target CEO Gregg Steinhafel, that they needed more time.

The magnitude of what was at stake began weighing on some of those senior officials. “I remember wanting to vomit,” recalls one participant. Nobody disagreed with the negative assessment—everyone was well aware of Target’s operational problems—but there was still a strong sense of optimism among the leaders, many of whom were U.S. expats. The mentality, according to one former employee, was, “If there’s any team in retail that can turn this thing around, it’s us.” The group was riding a wave of momentum, in fact. They had overcome seemingly endless hurdles and worked gruelling hours to get to this point, and they knew there were costs to delaying. The former employee says the meeting ultimately concerned much more than when to open the first few stores; it was about the entirety of Target’s Canadian launch. Postponement would mean pushing back even more store openings. Everyone else in attendance expressed confidence in sticking to the schedule, and by the time the meeting concluded, it was clear the doors would open as promised. “That was the biggest mistake we could have made,” says the former employee.
...what emerged is a story of a company trapped by an overly ambitious launch schedule, an inexperienced leadership team expected to deal with the biggest crisis in the firm’s history, and a sophisticated retail giant felled by the most mundane, basic and embarrassing of errors.
Target ... had simply become accustomed to succeeding. “The company had never really failed before,” ...
“The company was pouring in resources left, right and sideways, so it was palpably exciting in Minneapolis,” says a former employee. But there was also immense pressure. “From the very beginning, there was a clock that was ticking,” says the former employee. “And that clock was absurd.” The company did everything it could to remove barriers that might slow progress and to ensure decisions could be made quickly. Timelines were hugely compressed. Building a new distribution centre from scratch, for example, might take a few years. Target was going to do it in less than two years—and it planned to construct three of them.
Loblaws started moving to SAP in 2007 and projected three to five years to get it done. The implementation took two years longer than expected because of unreliable data in the system. Target was again seeking to do the impossible: It was going to set up and run SAP in roughly two years.
The Mississauga head office, meanwhile, didn’t have a clear picture of how bad the situation was inside stores. The merchandising department’s software often indicated items were in stock, but then the team would field confused and angry phone calls from employees responsible for store operations, demanding to know why they didn’t have products. “We almost didn’t see what the customer was seeing,” says a former employee. “We’d look on paper and think we’re OK. Then we’d go to the store, and it’s like, ‘Oh my god.’”
Meanwhile, after a few rounds of store openings, the status update meetings Fisher held at headquarters had turned darkly comic. After the regular rundown of crippling operational problems, the president still ended each gathering with a pep talk of sorts, reiterating how proud he was of the team and all they had accomplished. Despite his stubborn optimism, those meetings had grown more tense too. Everyone knew the launch was a disaster and the company had to stop opening stores so it could fix its operational problems, but no one actually said so. “Nobody wanted to be the one person who stopped the Canadian venture,” says a former employee. “It wound up just being a constant elephant in the room.” There was also a sense of powerlessness. The Canadian expansion was ultimately driven by Minneapolis, and because of the real estate deal hatched by CEO Gregg Steinhafel, the company was committed to opening these stores. Speaking up wouldn’t have changed much. “That’s why, in the end, nobody fell on a sword. Because of the leases, it had to move forward.”
“We had so much faith we could solve any problem. If we just work a little harder, we’ll get to the resolution,” says a former employee. “But then the thing in front of you explodes.”
Business analysts (who were young and fresh out of school, remember) were judged based on the percentage of their products that were in stock at any given time, and a low percentage would result in a phone call from a vice-president demanding an explanation. But by flipping the auto-replenishment switch off, the system wouldn’t report an item as out of stock, so the analyst’s numbers would look good on paper. “They figured out how to game the system,” says a former employee. “They didn’t want to get in trouble and they didn’t really understand the implications.”
Leadership. It all boils down to leadership, perverse incentives, and the desire for hope to win out over experience.

Here is the cold difference. When companies make disabling mistakes, they go out of business and people have to look for work. When a military makes disabling mistakes, they are defeated on the battlefield, at sea, and their nation is put at strategic risk of defeat and collapse, bending the knee to the smarter, stronger power.

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